Reunert PresentsReunert PresentsReunert PresentsReunert Presents
AUDITED RESULTS FOR THE YEAR ENDED
30 SEPTEMBER 2006
AUDITED RESULTS FOR THE YEAR ENDED
30 SEPTEMBER 2006
• Strong improvement in top line growth
• Continued improvement in EBITDA as % of revenue
• Return of excess cash– Final dividend per share = 210 cents per share
– Total dividend distribution this year = R4.73 • Interim 63 cents per share• Special 200 cents per share• Final dividend 210 cents per share
• Proposed empowerment transaction
28%HEADLINE EARNINGS
PER SHARE
28%HEADLINE EARNINGS
PER SHARE
24 %FINAL DIVIDEND PER
SHARE
24 %FINAL DIVIDEND PER
SHARE
17%REVENUE
17%REVENUE
16,2%EBITDA as % OF
REVENUE
16,2%EBITDA as % OF
REVENUE
Salient FeaturesSalient Features
R Millions R million R million Change
2006 2005 %
Revenue 8 236 7 012 17
EBITDA 1 336 967 38
Depreciation ( 63) ( 50) (27)
Operating Profit 1 273 917 39
Interest & Dividends 65 50 30
Profit after Taxation 839 645 30
Share of Associates profit 95 79 20
Minority interests ( 11) ( 11)
Profit attrtributable to RLO shareholders 923 713 29
Basic earnings per share (cents) 527,0 411,4 28
Headline EPS (cents) 524,6 408,4 28
Normalised Headline EPS (cents) 495,3 394,1 26
HEPS excl STC on special dividend (cents) 549,6
Ord Dividends per share (cents) 273,0 222,0 23 Tax rate excl abnormal items & STC on
special dividend34,2 33,8 1
EBITDA % 16,2 13,8 17
CONDENSED INCOME STATEMENT
CONDENSED BALANCE SHEET R million R million
As at 30 September 2006 2005(Reviewed) (Restated)
EMPLOYMENT OF CAPITALFixed Assets 467 336
Goodwill 327 329
Investments 149 116
RC&C Finance Debtors (gross) 1 404 1 028
Current Assets 2 274 1 566
Stock 809 561
Accounts Receivable 1 111 797
Other Debit Balances 354 208
Gross Assets 4 621 3 375
Net Current Liabilities (2 459) (1 511)
Net operating Assets 2 162 1 864
CAPITAL EMPLOYEDShareholders' Funds (1 719) (1 605)
Deferred Tax (net) ( 83) ( 44)
Long-term borrowings (incl. short-term portion) ( 130) ( 131)
Net Cash 958 783
RC&C Finance Borrowings (1 188) ( 867)
(2 162) (1 864)
(Reviewed) (Restated)
R million R million
For year ended 30 September 2006 2005
EBITDA 1 336 967
Working Capital change -Finco receivables ( 376) ( 500)
-Other ( 253) ( 101)
Net interest & dividends received 121 119
Taxation Paid ( 347) ( 365)
Dividends Paid ( 464) ( 308)
CASH GENERATED/(UTILISED) BY OPERATIONS 17 ( 188)
Capital Expenditure ( 194) ( 60)
Long-term borrowings (repaid)/raised ( 1) 129
Other Movements 32 68
Actual Net Cash Flow ( 146) ( 51)
Movement in Total Finco borrowings 387 553
Net Cash Flow adjusted for Total Finco borrowings 241 502
CONDENSED CASH FLOW STATEMENT
2006 2005 2004 2003 2002
Operating margin(%) 15,5 13,1 11,2 10,0 9,3
ROE (%) 56,7 53,5 49,3 31,0 44,1
Dividend cover (Times) 1,8 1,8 1,7 1,5 1,9
Dividends per share (cents) 273,0 222,0 160,0 120,0 118,0
Special dividend per share (cents)
200,0
Dividend cover calculated on Normalised HEPS
Ratio’sRatio’s
BEE dealBEE deal
Partners are an essential part of our strategy
The StructureThe Structure
The Rebatona
Educational Trust
Retona
BargenelOther Ordinary Shareholders
Qualifying Reunert Employees
The Peotona founding members
Cheryl Carolus (8.7%)
Dolly Mokgatle (8.4%)
Noluthando Orleyn (8.4%)
Wendy Lucas-Bull (4.5%)
Reunert Staff Share Trust
Reunert
70%
30%
100% 100%
9.5% 0.3% 90.2%
Preference share R1,1bn
The ObjectivesThe Objectives
• To benefit a broad base of previously disadvantaged people
• Full economic and voting rights transferred from Day ONE• BEE partners of standing, able to add value to Reunert
– Locked in as Reunert shareholders for at least 11 year period
• Transparent, upfront economic cost with limited subsequent dilution to shareholders– Approximately 3,1% of Reunert’s market capitilisation on
15_November 2006
– Price is based on VWAP per Reunert share less 10% discount
The Education TrustThe Education Trust
• Rebatona Educational Trust– Broad-based BEE trust– Will own effective 6,65% of Reunert shares in issue
• Beneficiaries – Black youth & black entrepreneurs
• To provide further education & training– English, mathematics, science & accountancy– Groundwork for tertiary education– Providing skills development to assist students to succeed in business
• Broadening concept of Reunert College– More than 550 students since 1993– Some 400 have received bursaries for tertiary education
• BEE Committee– Will identify beneficiaries on an annual basis
The PartnersThe Partners
• In-depth knowledge of government policy• African National Congress’s overall policy coordinator in 1994• South African High Commissioner to London• Former CEO of SA Tourism
• Former CEO of Spoornet• Chairperson of Women Investment Portfolio Holdings Limited
(Wiphold)• Managing director of Transmission, Eskom Holdings Limited
• National director of the Commission for Conciliation, Mediation and Arbitration
• Extensive experience in Human Rights and Labour Law
• Former CEO of FirstRand Bank Limited’s retail business• International partner of Andersen Consulting – 14 years• Founding chairperson of Business Against Crime
Cheryl Ann Carolus(8.7%)
Wendy Elizabeth Lucas-Bull(4.5%)
Noluthando Dorian Orleyn(8.4%)
Dolly Doreen Mokgatle(8.4%)
The EmployeesThe Employees
• Reunert Share Trust• Approx 6 000 Reunert employees
– South African citizen
– Not benefiting from other Reunert share incentive schemes
• 100 Reunert shares each– Receive full economic benefit from date of issue
– Shares subject to 5 year holding period
Cost of the transactionCost of the transaction
• Disposal value = R66,81 – (volume weighted average price between 1 & 16 August 2006)– Less 10% discount
• 18,5 million shares – R1,2 billion less 10% = R1,1 billion
• Educational Trust• Employees
– +R 46 million– Share price of R77,50 as at 15 Nov 2006
• Economic cost to Reunert shareholders– + R471million– 3,1% of Reunert’s market cap on 15 November 2006
• Taxation– Employees will pay capital gains tax– Company get a tax relief on cost (+R13 million)
TimelineTimeline
• Detailed transaction announcement released– 20 November
• Circular to be distributed to shareholders together with 2006 annual report– Mid December
• Shareholder approval obtained @ AGM– 6 February 2007
Creating space for our businesses to grow
Operational ReviewOperational Review
Quince CapitalQuince Capital
• New finance company– Quince Capital– Subject to certain suspensive conditions
• Reunert & PSG Group– Reunert 49,9%– PSG 39,9%– Michiel le Roux 7,9%– Individuals 2,3%
• Reunert will contribute RC&C Finance (Nashua Finance)– R125 million equity– R250 million goodwill
• PSG + individuals will contribute R375 million cash• Quince Capital will focus on
– Asset backed finance– Bridging finance– Scrip finance– other
Your partner in infrastructure development
30%REVENUE
2006: R2,57 billion
2005: R1,98 billion
30%REVENUE
2006: R2,57 billion
2005: R1,98 billion
66%OPERATING PROFIT
2006: R552 million
2005: R333 million
66%OPERATING PROFIT
2006: R552 million
2005: R333 million
Electrical EngineeringElectrical Engineering
• Capital expenditure– R47 million spent in FY06
– Rod casting
– R40 million in 2007
• Cafca, Zimbabwe– Capacity will be sold in South Africa
– New management
– Reserve Bank approvals outstanding
• Prospects– Platinum
– Gautrain
– Utilities & municipalities
Energy CablesEnergy Cables
Impact of sharp increase in copper priceImpact of sharp increase in copper price
Assumption Base 100
Selling Price Cu @ R20,668/ton
2005 Av
Cu @ R37,347/ton
2006 Av
Cu content 40 72,28
Other material 20 20
Labour &OH 30 30
Profit 10 13.58
Profit % 10% 10%
Selling price 100 135.80This is a best case
• Significant increase in revenue• Aberdare closed down
– Increased Telkom market share
– Agreement reached with Aberdare to acquire its telecom businesses’ assets
– 50% share in JV between ATC & Aberdare
– Subject to Competition Commission approval
Non-
telkom
35% Telkom
65%
Cable sales
Copper 80%
Optic fibre 17%
OF accessories3%
Telecom cables Telecom cables
Exports vs LocalExports
5%
Local95%
Capacity utilisation
2006 2005 2004
Copper 78% 39% 41%
OF Cable 30% 7% 4%
• Future growth optic fibre cable
• Export potential– Nigeria– Possible plant
• Telkom– New generation network
• Non-telkom– Gautrain– Power stations– Railway system
• Neotel (SNO) & Infracom
Telecom cables Telecom cables
• Expanding manufacturing capacity– Increased demand from Europe– South Africa– Capex:
• 2006: R48 million• 2007: R44 million
• Lesotho– Two plants in full production– Satisfied with progress
• Exports– 21% growth year-on-year– 27% of total sales are outside SA– CBE products 63% growth
• Mostly Europe
• Australia
Low voltageLow voltage
Sales per revenue stream
Other9%
CBE19%
Residential
30%
Industrial42%
% Split between own and other
2006 2005 2004
Wiring accessories 3% 2% 0%
Own manufactured 84% 86% 85%
Mitsubishi 13% 12% 15%
Low voltageLow voltage
Export Sales
Other18%
Far East11%
USA12%
Europe19%
Australia40%
Split exports vs local sales
0%
20%
40%
60%
80%
100%
2006 2005 2004
export
local
Low voltageLow voltage
ElectronicsElectronics
% contribution Revenue Operating Profit
Office Systems 13% R1,2 billion 22% R314 million
Consumer Products & Services 43% R4,1 billion 27% R375 million
Telecommunications 14% R1,2 billion 10% R143 million
Reutech 3% R0,3 billion 2% R 30 million
Total Electronics contribution 73% 61%
15%REVENUE
2006: R7 billion
2005: R6 billion
15%REVENUE
2006: R7 billion
2005: R6 billion
20%OPERATING PROFIT
2006: R862 million
2005: R717 million
20%OPERATING PROFIT
2006: R862 million
2005: R717 million
• Streamlining existing businesses– Acuo Technologies absorbed in Nashua
– Nashua Broadband transferred to Nashua Mobile
• Dynatrack– Incorporated into Nashua, now part of Acuo
– Software product
– Provides customer with printing & copying cost management system
– Established product with customer base
– Opportunity to develop derivatives
– + 8 people
NashuaNashua
• Increase total document volume– High volume printers & copiers– Multi-functional units grew over 20%– Colour printers – now 2nd largest in industry
• Strong performance from Nashua Kopano
• Operating margins decreased slightly– Implementation strategic sales division– Won several large tenders– Marketing expenditure on colour printers
• Annuity income
• Rentals– Nashua Finance
• Increased finance book from R1 billion to R1,4 billion
NashuaNashua
• Move towards one stop service provider– Mobile, fixed line, voice over internet protocol & data services
• Expanded into retail market– Now 115 retail outlets countrywide
415 982
96 129
94 034
Sep 05
114%
107%
% growth
576 820Closing contract base
205 927Total connections
194 832Contract connections for year
Sep 06
Nashua MobileNashua Mobile
10.61%10.51%Churn
R521 7%R485ARPU (average for period)
2 09511 0953G/HSDPA connections
10,61%10,51%Churn
39%
• Black Dot – Incorporated into Nashua Mobile
– An ISP, website host & developer
– Complements the strategy on Nashua Broadband
– Exploit convergences of telecoms IT & VOIP
– + 35 people
• Mobile number portability– Implemented 10 November
– Will monitor closely
Nashua MobileNashua Mobile
RC&C HoldingsRC&C Holdings
• Volatility of currency market• Business Systems
– Grown strongly past year
– Now contributes 30% of revenue & 70% of operating profit
– Improve market share in office systems, telecommunication, presentation systems and closed circuit television
• Pansolutions– Wholly owned franchise
– Operating Johannesburg, Cape Town, Durban & Pretoria
– Black empowered after selling 26% to key individuals
– Will acquire Osec to enhance BEE tender business
RC&C HoldingsRC&C Holdings
• Consumer electronics– Price deflation
– Chinese manufacturers driving prices down
– Operating margins squeezed
– However, increase volumes
• Futronic & Akai– Refrigeration, air conditioning & cooking appliances
– Expect continued growth in these market segments
• Soccer World Cup 2010– Special unit created
– Panasonic products & systems
• LED screens & data streaming systems
ReutechReutech
• Improved profitability from R3,7 million to R30 million– Restructuring previous year
– Improvement in sales
– Fuchs Electronics disappointed
– RRS, RDL Technologies & RDI Communications profitable
• Disposal process was started– Various offers received
Siemens TelecommunicationsSiemens Telecommunications
• Strong revenue growth 29%• Operating profit 8%• Telkom
– New generation network– Broadband equipment– System care contract
• Vodacom– Launched 3G & HDSPA– Planning to launch 3G in Tanzania
• Cell C– Supplied HLRi, Operational systems support and next generation
messaging
• MTN– Supply contract in Swaziland
Siemens-Nokia dealSiemens-Nokia deal
• 50-50 joint venture Siemens Networks & Nokia• Effective 1 January 2007 • Nokia & Siemens telecommunications infrastructure
businesses will be merged• Housed under Nokia Siemens Networks• Enterprise business carved out
– Stand alone
– +R400 million of sales
– Challenging environment
ProspectsProspectsProspectsProspects
These results are based on International Financial Reporting Standards (IFRS)
Generally the business climate is expected to be favourable and most of the group’s businesses are likely to continue producing real growth in earnings. The consumer business may experience slower demand in a higher interest rate environment.
Overall the group should achieve real earnings growth before the one off charge arising from the BEE transaction.